In addition to the 16% corporate tax, a minimum turnover tax will come into effect from 2024, as well as a global minimum tax of 15%, and companies should be very careful to calculate what tax they are entitled to. The global minimum corporate tax of 15% is a measure of the Organization for Economic Co-operation and Development (OECD) at the global level, which aims to ensure a global minimum level of taxation of multinational business groups and large national groups. In the EU, this tax is regulated by a directive that has already been transposed into a draft law by the Ministry of Finance and is currently in the legislative process for adoption in the parliament.

Multinational groups, as well as large national groups that meet certain conditions of the law, will pay corporate tax of at least 15%. Obviously, businesses in Romania are not subject to this minimum tax, as the standard local income tax rate is 16%. In reality, the various adjustments that need to be made may result in the effective tax rate being lower than this 16% threshold.

For income tax, the calculation rules remain unchanged. In addition, starting next year, companies in Romania that meet certain turnover criteria will pay a tax of 1% if the nominal amount is higher than the amount resulting from the income tax calculation.

In a new episode of PwC Romania Tax Talks, Andrea Mitirice, PwC Partner in Romania, and Florin Rizea, Senior Manager, discussed the application of these taxes and the consequences for companies subject to the new rules, which, in addition to additional financial efforts, will also have to face efforts to implement these provisions, which are not easy at all.

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Basic statements

In Romania, in addition to the classic income tax, from next year we will also have a turnover tax and a global minimum tax. So there are three taxes, theoretically, on the same grounds, more or less.

The fact that the tax is 16% in Romania does not automatically save us. Local companies should make an assessment, analysis, whether they are somehow affected by this tax. And, obviously, then it is necessary to somehow monitor the correlation of what is happening at the group level with what is happening at the local level.

Therefore, being a new tax with very complex calculation rules, Romanian companies will have to allocate resources to understand these rules, communicate with the group to establish liability and obtain relevant information and estimate the costs of possible additional taxes to reflect them in the group’s various financial statements . reports In particular, if such a group includes a Romanian company, then, according to the draft law, this company will have to make the calculation.

Although this seems like a distant moment, in fact, already from the first quarter of 2024, companies that will be the payers of this tax must start preparing and even recording certain amounts in their financial statements.

Who does this concern? This applies to groups of companies with a consolidated revenue of more than €750 million. In jurisdictions where the effective tax rate is less than 15%, they will have to pay additional tax up to that 15% limit. For companies in Romania that are part of a multinational group or a local group of this size, there will be some calculation, determination and possibly reporting and payment implications.

The directive gives member states the right to introduce an additional local tax. And then companies in Romania will have to know how this local tax is calculated because they will have to eventually declare it and pay it if they are under this 15% ceiling.

In Romania, we now have a draft of this law, which was just approved by the Senate a few days ago, and in terms of the legislative process, it has to be approved by the Chamber of Deputies, and then promulgated by the President will be published in the Official Gazette. We expect this entire process to be completed by the end of this year.

From informal discussions with representatives of the Ministry of Finance, who are part of the working group that was engaged in the transposition of the Directive into our national legislation, we informally understood that this minimum turnover tax will be taken into account.

The article was signed by Andrea Mitirice, Partner at PwC in Romania, and Florin Rizea, Senior Manager.

Article supported by PwC Romania